Full year results presentation 52 Weeks to 31 December 2017 1
Continued good progress on strategic initiatives • Proposition enhancements in Frankie & Benny’s are improving volume momentum • Good progress across other Leisure brands • Pubs business continues to outperform the market and pipeline of new opportunities further strengthened • Concessions business expanding into new infrastructure hubs, and with relevant new brands • Cost reduction programme of £10m delivered ahead of plan, enabling reinvestment in Leisure business • Enhanced senior leadership team in place 2 2017 Full year results
Progressively improving volume momentum in our Leisure business Leisure business YoY, 6 month moving average LFL Sales LFL Covers June 16 Dec 16 June 17 Dec 17 3 2017 Full year results
Financial review 2 0 1 7 F u l l y e a r r e s u l t s 4
Financial highlights 2017 FY 2016 FY % 52 weeks 53 weeks Change £m £m Column1 679.3 Revenue 710.7 (4.4%) Like-for-like % (3.0%) EBITDA* 95.1 121.0 (21.4%) EBITDA margin %* 14.0% 17.0% EBIT / Operating profit* 58.6 79.2 (26.0%) Operating margin %* 8.6% 11.1% PBT* 56.7 77.1 (26.4%) Earnings per share* 22.3p 30.0p (25.7%) * Adjusted (pre-exceptional charge) Tot al sales decrease on a 52 week basis is (1.8%) 5 2017 Full year results
Exceptional charges FY 2017 Onerous lease Impairment of Restructuring Total provisions property, plant & costs equipment £m £m £m £m Column1 (2.3) Closed sites (2.7) 0.4 - 10.7 Distressed/closure sites 6.9 3.8 - Restructuring 4.8 4.8 - - 2017 Exceptional charge 4.2 4.2 4.8 13.2 • Successfully exited 21 out of 41 closed sites in FY2017 • Restructuring costs in line with expectations • Additional onerous lease and impairment provision due to specific trading in certain locations 6 2017 Full year results
Cost headwinds expected FY 2018 Column1 £m NLW / NMW / Apprentice levy/Auto-enrolment 4-5 Rent and rates 4-5 Purchase cost inflation 4-5 Sugar tax 1 Utilities 3 Total 16-19 • Continue to focus on cost efficiencies and expect to mitigate c.50% of 2018 cost increases via: – Continuing to leverage purchasing scale – Improved labour scheduling and deployment – Overhead savings 7 2017 Full year results
Capital expenditure and development 2017 FY 2016 FY £m £m Column1 Development expenditure 18.4 28.8 Refurbishment and maintenance expenditure 10.2 23.6 Technology investment 4.7 2.6 Total fixed asset additions 33.3 55.0 Number of new units 17 24 • Maintenance capital expenditure decreased year-on-year due to: – £7m bars to covers conversion programme in 2016 – Re-phasing of major refurbishment projects into 2018 • Openings in 2018 will be between 16 to 20, and will predominantly be within Pubs and Concessions • 2018 development capital expenditure – £24m to £30m • 2018 refurbishment and maintenance capital expenditure – £20m to £25m 8 2017 Full year results
Cash flow 2017 FY 2016 FY £m £m Column1 Adjusted operating profit* 58.6 79.2 Working capital and non-cash adjustments 12.5 1.1 Depreciation 36.5 41.8 Cash inflow from operations 107.6 122.1 Net interest paid (0.7) (0.8) Tax paid (7.1) (16.2) Maintenance capital expenditure (14.9) (26.2) Free cash flow 84.9 78.9 Development capital expenditure (18.4) (28.8) Movement in capital creditor (5.9) (10.3) Dividend paid (34.9) (34.9) Utilisation of onerous lease provisions (12.7) (3.3) Exceptional restructuring costs (6.8) (3.8) Other items 0.5 2.3 Cash inflow 6.7 0.1 Net bank debt at start of year (28.3) (28.4) Net bank debt at end of year (21.6) (28.3) * Adjusted (pre-exceptional charge) 9 2017 Full year results
Balance sheet and key ratios Balance Sheet As at 31 December As at 1 January 2017 2017 £m £m Net assets 201.9 201.6 Net bank debt (21.6) (28.3) • Revolving £140m credit facility committed to June 2020 • EBITDA interest cover (12 months): 66x (2016: 60x), covenant >4x • Net debt to EBITDA (12 months): 0.2x (2016: 0.2x), covenant <3x • Fixed charge cover (12 months): 2.1x (2016: 2.4x) Dividend 2017 2016 FY FY Full year dividend 17.4p 17.4p • Full year dividend maintained reflecting the Board’s continued confidence in delivery of the plan 10 2017 Full year results
Business review 2 0 1 7 F u l l y e a r r e s u l t s 11
Our plan 1 Re-establish competitiveness of our Leisure brands 2 Serve customers better and more efficiently 3 Grow our Pubs and Concessions businesses 4 Build a leaner, faster and more focused organisation 12 2017 Full year results
1 Re- establishing competitiveness of Frankie & Benny’s Deepened the distinctiveness of offer Marketing to attract back lapsed Restored value credentials customers • Upgraded menus to amplify appeal • Significant investment in core menu • Launched refreshed brand look and to core family audience price: feel – Mains entry prices reduced by 26% • Improved ingredients quality • Upgraded website and app – LFL mains prices reduced by 7% • Introduced popular new dishes • Improved digital listings • Re-introduced £9.95 two-course value • Integrated online / offline media • 10 sites piloted for restaurant menu, lowest price for six years ‘capital refresh’ campaigns • Strengthened partnerships with value affiliates • Intensified promotional activity 13 2017 Full year results
1 Customers are recognising improvements Revisit intention scores Kids’ menu NPS* Value for Money* (Change 2017 vs 2016) (Rating Q4 2017) Frankie & Benny’s Frankie & Benny's 29 Pizza Hut Wagamama 7.9 TGIF Nando’s Pizza Express ASK Italian Zizzi Pizza Express Jamie's Italian 7.1 14 Harvester Zizzi Bella Italia Prezzo Ask Italian Pizza Hut Nando's Bella Italia Prezzo -0.6 -0.4 -0.2 +0.0 0 +0.2 +0.4 2016 FY 2017 FY 50 60 70 2016 FY 2017 FY Source: MCA Source: MCA Source: MCA Source: Morar/BrandVue *MCA independent results; rolling 12 months rating 14 2017 Full year results
1 Volume momentum is progressively improving Frankie & Benny’s LFL covers YoY, 6 month moving average 0% • Improved volume momentum • Brand is taking volume share: – Coffer Peach restaurants LFL – 0.5% Aug 17 – Jan 18 – 3.5% average LFL price increases over last six months by top casual dining brands June 16 Dec 16 June 17 Dec 17 2017 Full year results 15
1 Re-establishing competitiveness of other Leisure brands • Continued improved trading momentum via discounting LFL Covers* of ‘trial’ menu vs old ‘core’ menu % pts • ‘ Firejacks ’ new concept site trading well 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% *6 week moving average • New menu rolled out across the estate in January 2018: – Better value – Improved accessibility – Greater customisation options • Retrained service standards • Strengthened operations leadership team 16 2017 Full year results
2 Serving customers better and more efficiently # of sites on Deliveroo Serve more • Continued optimisation of labour management: tables, 130 – 121 Deployment of labour scheduling tool more quickly – More flexible working practices – 7% reduction in labour cost per cover in the Leisure 74 business* 41 37 • New service standards rolled out across Leisure business • Increased focus on convenience solutions for customers: Q1 17 Q2 17 Q3 17 Q4 17 Feb 18 – Increased penetration with Deliveroo Pay with app functionality – Trials underway with UberEats and Just Eat – Trialling new ‘virtual’ delivery brand Correct for – Click and collect functionality successfully trialled and rolling under-staffing out in Q2 to Leisure business at peak times – Pay with app functionality, facilitating faster payment, rolling out by end of Q1 – Integrated to OpenTable as a booking partner * Year-on-year (H2 17 vs H2 16) 17 2017 Full year results
1 Leisure brands: next steps Marketing Proposition • New Frankie & Benny’s menu: • New CRM platform enabling targeted customer contact – Improved healthy range – Extended vegetarian and vegan • Upgraded social media activity options – Innovative desserts • Extended affiliate partnerships – Optimised pricing • Introduction of limited time offers • Further delivery rollout Operational effectiveness Capital investment • Investment in more granular • Optimisation and potential further customer feedback tools investment in Frankie & Benny’s site refreshes • Further optimisation of service • Conversions of more Coast to Coasts standards to Firejacks 18 2017 Full year results
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